Using an international sample of banks and country-level indices for individualism and uncertainty avoidance as proxies for national culture, we study how differences in culture across countries affect accounting conservatism and bank risk-taking. Consistent with expectations, our cross-country analysis indicates that individualism is negatively (positively) related to conservatism (risk-taking) and uncertainty avoidance is positively (negatively) related to conservatism (risk-taking). We also find that cultures that encourage higher risk-taking experienced more bank failures and bank troubles during the recent financial crisis. Data Availability: Data are available from the sources identified in the text.

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While prior studies have examined how investors perceive extreme forms of tax avoidance behavior such as tax sheltering and uncertain tax position (e.g., Hanlon and Slemrod 2009;Wilson 2009;Koester 2011;Hutchens and Rego 2012), there is little evidence on how investors perceive less extreme forms of tax avoidance. This study fills this void by examining the relation between firm's cost of equity and corporate tax avoidance using three measures that capture less extreme forms of corporate tax avoidance: book-tax differences, permanent book-tax differences, and long-run cash effective tax rates. We find that less aggressive forms of corporate tax avoidance significantly reduces a firm's cost of equity. Further analyses reveal that this effect is stronger for (i) firms with better outside monitoring, (ii) firms that likely realize higher marginal benefits from tax savings, and (iii) firms with better information quality. Our study presents large-sample results on how investors perceive less aggressive corporate tax avoidance and shows that tax planning is a value-enhancing activity for shareholders. Choudhary, P., Koester, A., Shevlin, T., 2012. Assessing tax accrual quality. Working Paper, Georgetown University. Claus, J., Thomas, J., 2001. Equity premia as low as three percent? Evidence from analysts' earnings forecasts for domestic and international stock markets. The Journal of Finance 56 (5), 1629-1666. Dechow, P.M., Dichev, I.D., 2002. The quality of accruals and earnings: The role of accrual estimation errors. The Accounting Review 77, 35-59. Denis, D.J., Sibilkov, V., 2010. Financial constraints, investment, and the value of cash holdings. Review of Financial Studies 23 (1), 247-269. Desai, M., 2004. The degradation of corporate profits. Harvard University, working paper. 34 Desai, M., Dharmapala, D., 2006. Corporate tax avoidance and high-powered incentives.

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We posit that the effect of non-audit fees on audit quality is conditional on auditor industry specialization. Industry specialist auditors are more likely than nonspecialists to be concerned about reputation losses and litigation exposure, and to benefit from knowledge spillovers from the provision of non-audit services. We find evidence that audit quality measured by increased propensity to issue going-concern opinion, increased propensity to miss analysts' forecasts, as well as higher earnings-response coefficients increases with the level of non-audit services acquired from industry specialist auditors compared to nonspecialist auditors. [2005], Francis and Ke [2006]) by showing that the effects of non-audit services on audit quality are not readily apparent without also jointly accounting for the effects of auditor specialization.Regulators' concerns that the provision of non-audit services impairs auditor independence (Levitt [1998], SEC [2000) gave rise to several studies that examine whether the provision of non-audit services impairs audit quality. These studies report seemingly conflicting results depending on the proxy of audit quality used. For example, notwithstanding earlier evidence by Frankel, Johnson, and Nelson [2002], recent evidence indicates that provision of non-audit services is not associated with the incidence of higher discretionary accruals and the propensity to meet earnings benchmarks (Ashbaugh, Lafond, and Mayhew [2003], Chung and Kallapur [2003]). Similarly, there is no evidence of an association between the provision of non-audit services and a reduced proclivity to issue going-concern opinions for financially distressed firms (Defond, Raghunandan, and Subramanyam [2002]). Kinney, Palmrose, and Scholz [2004] examine restatements of previously issued financial statements and find either no or negative association between restatements and major classes of non-audit services, and a positive association only for a small class of unspecified non-audit services (comprising 4.6% of total fees in their sample). In contrast, Francis and Ke [2006] document that market response to quarterly earnings surprises is significantly lower for firms with higher (vs. lower) non-audit fees. Krishnan, Sami, and Zhang [2005] also find a negative association between non-audit fees and earnings response coefficients in each of the three quarters following the proxy statement public disclosure of fee information.We view higher discretionary accruals, greater (lower) propensity to meet (miss) earnings benchmarks, lower propensity to issue going-concern opinions, and higher incidence of restatements to be proxies for impairment of auditor independence in fact. Discretionary accruals are subject to more measurement error than the other measures (Dechow, Sloan, and Sweeney [1995], Defond, Raghunandan, and Subramanyam [2002], Kinney and Libby [2002]). The strength of stock market responses to earnings surprises due to non-audit fees proxies for the market's perceptions of auditor independence in appearance. G...